The portfolio holds more than 5,800 positions in an effort to track an index of over 8,000 bonds, the Barclays U.S. Aggregate Bond index. Its assets are spread among corporate bonds (about 30%), Treasury and agency bonds (45%) and mortgage-backed securities (25%). After more than two decades, the fund has proven a worthy competitor to many actively managed funds, and its worst decline was a 5.8% loss over seven months in 1987, which was recovered in four months.

VBMFX is a fine fund. However, as I’ve discussed, the portfolio’s growing allocation to Treasury bonds has me concerned, and given how low yields are today, I don’t see how the fund can repeat its performance of the past decades in the years ahead. I think the investment-grade option will give investors the biggest bang for their buck during the next few years.